Kearny Financial Corp
For the period ended Sep 30, 2024. Filed Nov 5, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 5, 2024
KRNY$9.01-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0001617242-24-000030
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-05.
0001617242-24-000084
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 107 previous paragraphs and 73 current paragraphs.
35 unchanged; 34 reworded; 4 added; 25 removed; 13 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Executive Summary. Total assets increased $88.9 million to $7.77 billion at September 30, 2024 from $7.68 billion at June 30, 2024. The increase primarily reflected increases in cash and cash equivalents and in net loans receivable, partially offset by decreases in the market values of interest rate derivatives and a decrease in Federal Home Loan Bank of New York (“FHLB”) capital stock.
Current report
Borrowings. The balance of borrowings decreased by $229.9 million to $1.48 billion at September 30, 2024 from $1.71 billion at June 30, 2024, primarily reflecting a decrease in FHLB borrowings offset by an increase in brokered certificates of deposits, as noted above.
Current report
At September 30, 2024, we maintained available secured borrowing capacity with the FHLB and the Federal Reserve Discount Window of $2.06 billion, an increase of $240.0 million from June 30, 2024, and represents 26.5% of total assets.
Current report
Advertising and marketing expense increased $114,000 to $342,000 for the quarter ended September 30, 2024, largely driven by an increase in digital and online advertising campaigns to support our deposit growth initiatives.
Removed paragraphs (25)
Previous report
Executive Summary. Total assets decreased $222.8 million to $7.84 billion at March 31, 2024 from $8.06 billion at June 30, 2023. The decrease primarily reflected decreases in investment securities available for sale, as discussed below, and in net loans receivable.
Previous report
At March 31, 2024, nonperforming assets consisted of $39.5 million of nonperforming loans, compared to nonperforming assets of $55.6 million at June 30, 2023, which consisted of $42.6 million of nonperforming loans and $13.0 million of other real estate owned (“OREO”). The decrease in non performing assets was driven by the January 2024 sale of three related non-performing commercial real estate loans held-for-sale and the Company’s sole OREO asset.
Previous report
Borrowings. The balance of borrowings increased by $215.4 million to $1.72 billion at March 31, 2024 from $1.51 billion at June 30, 2023. The growth in borrowings was driven by increases in advances from the FHLB and the Federal Reserve Bank of New York (“FRBNY”), and resulted from the decline in brokered deposits of $232.3 million. FRBNY advances consisted of $100.0 million in borrowings under the Bank Term Funding Program (“BTFP”) which included favorable terms and conditions as compared to FHLB advances and brokered deposits.
Previous report
At March 31, 2024, we maintained available secured borrowing capacity of $1.81 billion, of which $1.47 billion was immediately accessible via in-place collateral and $336.7 million represented the market value of unpledged securities.
Previous report
On August 1, 2022, we announced that the Board of Directors had authorized a new stock repurchase plan to repurchase up to 4,000,000 shares, and the completion of our previous stock repurchase plan, which authorized the repurchase of 7,602,021 shares. During the nine months ended March 31, 2024, we repurchased 1,504,747 shares of common stock at a cost of $11.2 million, or $7.47 per share. On November 7, 2023, we announced the completion of this stock repurchase plan.
Previous report
Loss on sale of loans was $712,000 for the quarter ended March 31, 2024 compared to a loss on sale of loans of $2.4 million during the comparative period. The decrease in loan sale losses was largely attributable to a $2.5 million loss on the sale of a nonperforming commercial mortgage loan held-for-sale in the prior comparative period. The loss in the current period was primarily the result of the sale of three related nonperforming commercial real estate loans held-for-sale.
Previous report
Net occupancy expense of premises decreased $234,000 to $2.9 million for the quarter ended March 31, 2024. This decrease was primarily due to lower depreciation expense, rent expense and maintenance expense associated with the consolidation of two retail branch locations completed in the quarter ended June 30, 2023.
Previous report
FDIC insurance premiums decreased $117,000 to $1.4 million for the quarter ended March 31, 2024.
Previous report
Net Income. Net income for the nine months ended March 31, 2024 was $3.4 million, or $0.06 per diluted share, compared to $28.8 million, or $0.44 per diluted share for the nine months ended March 31, 2023. The decrease in net income reflected a decrease in net interest income and a decrease in non-interest income, partially offset by decreases in non-interest expense, income tax expense and the provision for credit losses. The net income for the current year period included a $12.9 million after-tax net loss on the sale of securities that resulted from an investment securities repositioning and an after-tax net loss of $6.3 million from the previously disclosed BOLI restructure.
Previous report
Net interest margin decreased 44 basis points to 1.98% for the nine months ended March 31, 2024, from 2.42% for the nine months ended March 31, 2023 and reflected an increase in the cost of interest-bearing liabilities, an increase in the average balance of interest-bearing borrowings and a decrease in the average balance of interest earning assets, partially offset by increases in the yield on interest-earning assets and a decrease in the average balance of interest-bearing deposits. The increased cost of interest-bearing liabilities and yield on interest-earning assets is the result of higher market interest rates that were caused by an increase in the federal funds target rate from 0% - 0.25% in March 2022 to 5.25% - 5.50% in July 2023.
Previous report
Provision for Credit Losses. The provision for credit losses decreased $93,000 to $2.7 million for the nine months ended March 31, 2024, compared to $2.8 million for the nine months ended March 31, 2023. The provision for the nine months ended March 31, 2024 was primarily driven by charge-offs on three related commercial real estate loans. By comparison, the provision for credit losses for the nine months ended March 31, 2023 was largely attributable to loan growth, partially offset by a reduction in the expected life of the loan portfolio and a net reduction in reserves on loans individually analyzed for impairment.
Previous report
Non-Interest Income. Total non-interest income decreased $6.9 million to a loss of $7.8 million for the nine months ended March 31, 2024, compared to a loss of $915,000 for the nine months ended March 31, 2023.
Previous report
Loss on sale and call of securities was $18.1 million during the nine months ended March 31, 2024 compared to a loss of $15.2 million recorded during the prior year period. The loss in the current period was due to the repositioning of our investment securities portfolio that involved the sale of $122.2 million of available for sale debt securities in December 2023. Proceeds from the sale were utilized to retire higher-cost wholesale funding and to reinvest in loans yielding approximately 7.0%.
Previous report
Loss on sale of loans was $393,000 for the nine months ended March 31, 2024 compared to a loss of $1.8 million during the comparative period. The decrease in loan sale losses was largely attributable to a $2.5 million loss on the sale of a nonperforming commercial mortgage loan held-for-sale in the prior comparative period. The loss in the current period was primarily the result of the sale of three related nonperforming commercial real estate loans held-for-sale.
Previous report
We recognized a non-recurring loss of $974,000 attributable to the write-down of one other real estate owned (“OREO”) property during the quarter ended December 31, 2023, while there were no such losses recorded in the prior period. This OREO asset was subsequently sold during the quarter ended March 31, 2024.
Previous report
Income from bank owned life insurance decreased $1.2 million to $5.9 million for the nine months ended March 31, 2024. The decrease was primarily due to lower non-recurring payouts on life insurance policies of $1.5 million compared to the prior year period and non-recurring exchange charges of $573,000 in the current year period related to the BOLI restructure, noted above. Excluding these non-recurring items, BOLI income improved $673,000 as a result of the BOLI restructure.
Previous report
Other non-interest income decreased $2.8 million to $2.6 million for the nine months ended March 31, 2024. The decrease in other non-interest income was primarily attributable to a non-recurring gain of $2.9 million from the sale of a former branch location during the prior year period.
Previous report
Non-Interest Expense. Total non-interest expense decreased $6.4 million to $88.6 million for the nine months ended March 31, 2024, compared to $95.0 million for the nine months ended March 31, 2023.
Previous report
Salaries and employee benefits decreased $6.3 million to $52.0 million for the nine months ended March 31, 2024. This decrease was primarily driven by lower salary expense resulting from a decrease in employee headcount from March 31, 2023 to March 31, 2024, and a decrease in incentive payments tied to loan origination volume. The headcount reductions were mainly attributable to the workforce realignment completed in the quarter ended December 31, 2022, which included $250,000 of non-recurring severance expense.
Previous report
Net occupancy expense of premises decreased $879,000 to $8.3 million for the nine months ended March 31, 2024. This decrease was primarily due to decreases in rent expense, depreciation expense, and building repairs and maintenance expense. These decreases are a result of the consolidation of two branch locations during the quarter ended June 30, 2023.
Previous report
Advertising and marketing expense decreased $975,000 to $916,000 for the nine months ended March 31, 2024. This decrease in advertising expense resulted from the adoption of lower cost in-house digital campaigns supporting our loan and deposit growth initiatives.
Previous report
FDIC insurance premiums increased $770,000 to $4.4 million for the nine months ended March 31, 2024. The increase was largely attributable to an updated assessment rate from the FDIC.
Previous report
Other non-interest expense increased $515,000 to $10.4 million for the nine months ended March 31, 2024. This increase was primarily attributable to an $806,000 increase in OREO expenses. The bank’s sole OREO asset was sold in the quarter ended March 31, 2024. This increase was partially offset by a decrease in professional and consulting, loan and legal expenses.
Previous report
Provision for Income Taxes. Provision for income taxes decreased $1.4 million to $6.8 million for the nine months ended March 31, 2024 from $8.2 million for the nine months ended March 31, 2023.
Previous report
Effective tax rates for the nine months ended March 31, 2024 and 2023 were 66.6% and 22.1%, respectively. The increase in the effective tax rate was primarily due to discrete tax costs of $5.7 million associated with the BOLI restructure.
Reworded paragraphs (34)
Previous wording
This Quarterly Report on Form 10-Q may include certain forward-looking statements based on current management expectations. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may”, “will”, “believe”, “expect”, “estimate”, “anticipate”, “continue”, or similar terms or variations on those terms, or the negative of those terms. The actual results of the Company could differ materially from those management expectations. This includes statements regarding general economic conditions, the effects of the recent turmoil in the banking industry (including the failure of three financial institutions), legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities and failure to integrate or profitably operate acquired businesses. Additional potential factors include changes in interest rates, the rate of inflation, deposit flows, cost of funds, demand for loan products and financial services, competition and changes in the quality or composition of loan and investment portfolios of the Company. Other factors that could cause future results to vary from current management expectations include changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices. Further description of the risks and uncertainties to the business are included in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023, under “Item 1A. Risk Factors.”
Current wording
This Quarterly Report on Form 10-Q may include certain forward-looking statements based on current management expectations. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may”, “will”, “believe”, “expect”, “estimate”, “anticipate”, “continue”, or similar terms or variations on those terms, or the negative of those terms. The actual results of the Company could differ materially from those management expectations. This includes statements regarding general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities and failure to integrate or profitably operate acquired businesses. Additional potential factors include changes in interest rates, the rate of inflation, deposit flows, cost of funds, demand for loan products and financial services, competition and changes in the quality or composition of loan and investment portfolios of the Company. Other factors that could cause future results to vary from current management expectations include changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices. Further description of the risks and uncertainties to the business are included in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024, under “Item 1A. Risk Factors.”
Previous wording
Investment Securities. Investment securities available for sale decreased $129.1 million to $1.10 billion at March 31, 2024, from $1.23 billion at June 30, 2023. This decrease was largely the result of sales of $104.1 million and principal repayments of $94.1 million, partially offset by purchases of $64.0 million and a fair value increase of $5.1 million.
Current wording
Investment Securities. Investment securities available for sale decreased $2.0 million to $1.07 billion at September 30, 2024, from $1.07 billion at June 30, 2024. This decrease was largely the result of principal repayments of $63.6 million, partially offset by purchases of $37.5 million and a $23.9 million increase in the fair value of the portfolio to a net unrealized loss of $106.8 million.
Previous wording
Investment securities held to maturity decreased $6.8 million to $139.6 million at March 31, 2024 from $146.5 million at June 30, 2023. This decrease was primarily driven by principal repayments of $7.0 million.
Current wording
Investment securities held to maturity decreased $3.5 million to $132.3 million at September 30, 2024 from $135.7 million at June 30, 2024. This decrease was driven by principal repayments of $3.5 million.
Previous wording
Loans Held-for-Sale. Loans held-for-sale totaled $4.1 million at March 31, 2024 as compared to $9.6 million at June 30, 2023 and are reported separately from the balance of net loans receivable. During the nine months ended March 31, 2024, we sold $59.5 million of residential mortgage loans, resulting in a gain on sale of $491,000 and $10.8 million of commercial mortgage loans, resulting in a loss on sale of $884,000.
Current wording
Loans Held-for-Sale. Loans held-for-sale totaled $8.9 million at September 30, 2024 as compared to $6.0 million at June 30, 2024 and are reported separately from the balance of net loans receivable. During the three months ended September 30, 2024, we sold $26.6 million of residential mortgage loans, resulting in a gain on sale of $200,000.
Previous wording
Net Loans Receivable. Net loans receivable decreased $67.3 million, or 1.2%, to $5.71 billion at March 31, 2024 from $5.78 billion at June 30, 2023. Details regarding the change in the loan portfolio, by loan segment, are presented below:
Current wording
Net Loans Receivable. Net loans receivable increased $51.5 million, or 0.9%, to $5.74 billion at September 30, 2024 from $5.69 billion at June 30, 2024. Details regarding the change in the loan portfolio, by loan segment, are presented below:
Previous wording
Commercial loan origination volume for the nine months ended March 31, 2024 totaled $217.5 million, comprised of $75.7 million of commercial mortgage loan originations, $77.3 million of commercial business loan originations and construction loan disbursements of $64.5 million.
Current wording
Commercial loan origination volume for the three months ended September 30, 2024 totaled $85.2 million, comprised of $37.3 million of commercial mortgage loan originations, $29.7 million of commercial business loan originations and construction loan disbursements of $18.2 million.
Previous wording
One- to four-family residential mortgage loan origination volume, excluding loans held-for-sale, totaled $82.6 million for the nine months ended March 31, 2024 and was supplemented with the purchase of loans totaling $59.9 million. Home equity loan and line of credit origination volume for the same period totaled $12.5 million.
Current wording
One- to four-family residential mortgage loan origination volume, excluding loans held-for-sale, totaled $50.1 million for the three months ended September 30, 2024. Home equity loan and line of credit origination volume for the same period totaled $4.6 million.
Previous wording
Nonperforming Assets. Nonperforming assets decreased by $16.0 million to $39.5 million, or 0.50% of total assets, at March 31, 2024, from $55.6 million, or 0.69% of total assets, at June 30, 2023.
Current wording
Nonperforming Assets. Nonperforming assets remained steady at $39.9 million, or 0.51% of total assets, at September 30, 2024, and $39.9 million, or 0.52% of total assets, at June 30, 2024, respectively.
Previous wording
Allowance for Credit Losses (“ACL”). At March 31, 2024, the ACL totaled $44.9 million, or 0.78% of total loans, reflecting a decrease of $3.8 million from $48.7 million, or 0.83% of total loans, at June 30, 2023. The decrease during the nine months ended March 31, 2024 was largely attributable to net charge-offs of $6.5 million and a decrease in the balance of loans receivable, partially offset by a provision for credit losses of $2.7 million. The charge-offs recorded were primarily driven by the sale of three related non-performing loans in January 2024. Of the $6.5 million of net charge-offs recorded during the nine months ended March 31, 2024, $3.3 million had previously been individually reserved for within the ACL. The provision for credit losses for the nine months ended March 31, 2024 was primarily driven by charge-offs, as discussed above, partially offset by a decrease in the balance of loans receivable.
Current wording
Allowance for Credit Losses (“ACL”). At September 30, 2024 and June 30, 2024, the ACL totaled $44.9 million, or 0.78% of total loans. The ACL for the three months ended September 30, 2024 reflected net charge-offs of $124,000, partially offset by a provision for credit losses of $108,000. The provision for credit losses for the three months ended September 30, 2024 was primarily driven by an increase in the balance of loans receivable.
Previous wording
Other Assets. The aggregate balance of other assets, including premises and equipment, Federal Home Loan Bank (“FHLB”) stock, interest receivable, goodwill, core deposit intangibles, bank owned life insurance (“BOLI”), deferred income taxes, OREO and other assets, decreased $14.7 million to $815.1 million at March 31, 2024 from $829.8 million at June 30, 2023. The decrease in the balance of these other assets during the nine months ended March 31, 2024 reflected the January 2024 sale of our sole OREO asset and a decrease in the market value of interest rate derivatives, partially offset by an increase in Federal Home Loan Bank of New York (“FHLBNY”) stock. The remaining change generally reflected normal operating fluctuations within these line items.
Current wording
Other Assets. The aggregate balance of other assets, including premises and equipment, Federal Home Loan Bank (“FHLB”) stock, interest receivable, goodwill, core deposit intangibles, bank owned life insurance (“BOLI”), deferred income taxes, and other assets, decreased $51.6 million to $665.5 million at September 30, 2024 from $717.1 million at June 30, 2024. The decrease in the balance of these other assets during the three months ended September 30, 2024 largely reflected a decrease in the market value of interest rate derivatives and a decrease in FHLB stock, partially offset by an increase in BOLI. The remaining change generally reflected normal operating fluctuations within these line items.
Previous wording
Deposits. Total deposits decreased $420.1 million, or 7.5%, to $5.21 billion at March 31, 2024 from $5.63 billion at June 30, 2023. Included in total deposits are brokered and listing service time deposits of $408.2 million at March 31, 2024 and $640.5 million at June 30, 2023. The following table sets forth the distribution of, and changes in, deposits, by type, for the periods indicated:
Current wording
Deposits. Total deposits increased $312.4 million, or 6.1%, to $5.47 billion at September 30, 2024 from $5.16 billion at June 30, 2024. Included in total deposits are brokered time deposits of $733.3 million at September 30, 2024 and $408.2 million at June 30, 2024. This increase was largely the result of a reallocation from FHLB advances into brokered certificates of deposits, due to the relatively more favorable economics of brokered deposits compared to advances in the current economic environment. The following table sets forth the distribution of, and changes in, deposits, by type, for the periods indicated:
Previous wording
Uninsured deposits totaled $1.76 billion as of March 31, 2024 compared to $1.77 billion as of June 30, 2023. Excluding collateralized deposits of state and local governments, and deposits of the Bank’s wholly-owned subsidiary and holding company, uninsured deposits totaled $718.0 million, or 13.8% of total deposits, at March 31, 2024 compared to $710.4 million, or 12.6% of total deposits, at June 30, 2023.
Current wording
Uninsured deposits totaled $1.80 billion as of September 30, 2024 compared to $1.77 billion as of June 30, 2024. Excluding collateralized deposits of state and local governments, and deposits of the Bank’s wholly-owned subsidiary and holding company, uninsured deposits totaled $773.4 million, or 14.1% of total deposits, at September 30, 2024 compared to $764.4 million, or 14.8% of total deposits, at June 30, 2024.
Previous wording
Other Liabilities. The balance of other liabilities, including advance payments by borrowers for taxes and other miscellaneous liabilities, increased $2.1 million to $61.7 million at March 31, 2024 from $59.5 million at June 30, 2023. The change in the balance of these other liabilities generally reflected normal operating fluctuations during the period.
Current wording
Other Liabilities. The balance of other liabilities, including advance payments by borrowers for taxes and other miscellaneous liabilities, increased $8.5 million to $70.4 million at September 30, 2024 from $62.0 million at June 30, 2024. The change in the balance of these other liabilities generally reflected normal operating fluctuations during the period.
Previous wording
Stockholders’ Equity. Stockholders’ equity decreased $20.2 million to $849.1 million at March 31, 2024 from $869.3 million at June 30, 2023. The decrease in stockholders’ equity during the nine months ended March 31, 2024 largely reflected cash dividends of $20.7 million and share repurchases of $11.2 million, partially offset by a decrease in other comprehensive loss of $5.8 million and net income of $3.4 million. The decrease in other comprehensive loss was driven by the reclassification of a net realized loss on the sale of securities available for sale out of accumulated other comprehensive loss due to an investment securities repositioning and an increase in the fair value of our available for sale securities, partially offset by a decrease in the fair value of our derivatives portfolio.
Current wording
Stockholders’ Equity. Stockholders’ equity decreased $2.0 million to $751.5 million at September 30, 2024 from $753.6 million at June 30, 2024. The decrease in stockholders’ equity during the three months ended September 30, 2024 largely reflected cash dividends of $6.9 million and an other comprehensive loss of $1.6 million, partially offset by net income of $6.1 million. The other comprehensive loss for the three months ended September 30, 2024 was driven by a decrease in the fair value of our derivatives portfolio, partially offset by an increase in the fair value of our available for sale securities.
Previous wording
Book value per share decreased by $0.02 to $13.18 at March 31, 2024 while tangible book value per share decreased by $0.09 to $9.87 at March 31, 2024.
Current wording
Book value per share decreased by $0.06 to $11.64 at September 30, 2024 while tangible book value per share decreased by $0.05 to $9.85 at September 30, 2024.
Previous wording
Net Income. Net income for the quarter ended March 31, 2024 was $7.4 million, or $0.12 per diluted share, compared to $10.3 million, or $0.16 per diluted share for the quarter ended March 31, 2023. The decrease in net income reflected a decrease in net interest income, partially offset by an increase in non-interest income and decreases in non-interest expense, the provision for credit losses and income tax expense.
Current wording
Net Income. Net income for the quarter ended September 30, 2024 was $6.1 million, or $0.10 per diluted share, compared to $9.8 million, or $0.16 per diluted share, for the quarter ended September 30, 2023. The decrease in net income reflected a decrease in net interest income, partially offset by an increase in non-interest income and decreases in income tax expense and the provision for credit losses.
Previous wording
Net Interest Income. Net interest income decreased by $8.1 million to $34.3 million for the quarter ended March 31, 2024 compared to $42.4 million for the quarter ended March 31, 2023. The decrease between the comparative periods resulted from an increase of $13.0 million in interest expense, partially offset by an increase of $4.9 million in interest income. Included in net interest income for the quarters ended March 31, 2024 and 2023, respectively, was purchase accounting accretion of $734,000 and $711,000, and loan prepayment penalty income of $61,000 and $103,000.
Current wording
Net Interest Income. Net interest income decreased by $6.7 million to $32.4 million for the quarter ended September 30, 2024 compared to $39.2 million for the quarter ended September 30, 2023. The decrease between the comparative periods resulted from an increase of $8.8 million in interest expense, partially offset by an increase of $2.1 million in interest income. Included in net interest income for the quarters ended September 30, 2024 and 2023, respectively, was purchase accounting accretion of $649,000 and $650,000, and loan prepayment penalty income of $52,000 and $267,000.
Previous wording
Net interest margin decreased 31 basis points to 1.89% for the quarter ended March 31, 2024, from 2.20% for the quarter ended March 31, 2023 and reflected an increase in the cost of interest-bearing liabilities, an increase in the average balance of interest-bearing borrowings and a decrease in the average balance of interest-earning assets, partially offset by an increase in the yield on interest-earning assets and a decrease in the average balance of interest-bearing deposits. The increased cost of interest-bearing liabilities and yield on interest-earning assets is the result of higher market interest rates that were caused by an increase in the federal funds target rate from 0% - 0.25% in March 2022 to 5.25% - 5.50% in July 2023.
Current wording
Net interest margin decreased 30 basis points to 1.80% for the quarter ended September 30, 2024, from 2.10% for the quarter ended September 30, 2023 reflecting an increase in the cost of interest-bearing liabilities, an increase in the average balance of interest-bearing borrowings and a decrease in the average balance of interest-earning assets, partially offset by an increase in the yield on interest-earning assets and a decrease in the average balance of interest-bearing deposits.
Previous wording
Details surrounding the composition of, and changes to, net interest income are presented in the table below which reflects the components of the average balance sheet and of net interest income for the periods indicated. We derived the average yields and costs by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented with daily balances used to derive average balances. No tax equivalent adjustments have been made to yield or costs. Non-accrual loans were included in the calculation of average balances, however interest receivable on these loans has been fully reserved for and therefore not included in interest income. The yields and costs set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.
Current wording
Details regarding the composition of, and changes to, net interest income are presented in the table below which reflects the components of the average balance sheet and of net interest income for the periods indicated. We derived the average yields and costs by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented with daily balances used to derive average balances. No tax equivalent adjustments have been made to yield or costs. Non-accrual loans were included in the calculation of average balances, however interest receivable on these loans has been fully reserved for and therefore not included in interest income. The yields and costs set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.
Previous wording
(4)Includes average balances of non-interest-bearing deposits of $581.9 million and $634.3 million for the quarter ended March 31, 2024 and 2023, respectively.
Current wording
(4)Includes average balances of non-interest-bearing deposits of $599.1 million and $612.3 million for the quarter ended September 30, 2024 and 2023, respectively.
Previous wording
Provision for Credit Losses. The provision for credit losses decreased $102,000 to $349,000 for the quarter ended March 31, 2024, compared to $451,000 for the quarter ended March 31, 2023. The provision for the quarter ended March 31, 2024 was primarily driven by loan growth compared to previous quarter end loan balances. By comparison, the provision for credit losses for the quarter ended March 31, 2023 was largely driven by a slower prepayment rate assumption, partially offset by a net reduction in loans individually analyzed for impairment.
Current wording
Provision for Credit Losses. The provision for credit losses decreased $137,000 to $108,000 for the quarter ended September 30, 2024, compared to $245,000 for the quarter ended September 30, 2023. The provision for the quarter ended September 30, 2024 was primarily driven by loan growth compared to previous quarter end loan balances. By comparison, the provision for credit losses for the quarter ended September 30, 2023 was largely driven by additional reserves provided for individually analyzed loans and a slower prepayment rate assumption, partially offset by a decrease in the balance of loans receivable.
Previous wording
Non-Interest Income. Total non-interest income increased $2.6 million to $4.2 million for the quarter ended March 31, 2024, compared to $1.6 million for the quarter ended March 31, 2023.
Current wording
Non-Interest Income. Total non-interest income increased $616,000 to $4.6 million for the quarter ended September 30, 2024, compared to $4.0 million for the quarter ended September 30, 2023.
Previous wording
Income from BOLI increased $1.5 million to $3.0 million for the quarter ended March 31, 2024, primarily driven by a $631,000 non-recurring payment on one life insurance policy in the current period and improved income of $673,000 resulting from the BOLI restructure completed during the current quarter.
Current wording
Income from BOLI increased $901,000 to $2.6 million for the quarter ended September 30, 2024, primarily driven by improved income resulting from the BOLI restructure initiated in December 2023.
Previous wording
Fees and service charges decreased $253,000 to $657,000 for the quarter ended March 31, 2024. The decrease primarily reflected decreases in various loan-related and deposit-related fees and charges.
Current wording
Fees and service charges decreased $113,000 to $635,000 for the quarter ended September 30, 2024. The decrease primarily reflected decreases in various loan-related fees and charges.
Previous wording
Other non-interest income decreased $316,000 to $755,000 for the quarter ended March 31, 2024. The decrease in other non-interest income was primarily attributable to a reduction in OREO income as a result of the January 2024 sale of our sole OREO asset.
Current wording
Other non-interest income decreased $181,000 to $833,000 for the quarter ended September 30, 2024. The decrease in other non-interest income was primarily driven by the absence of OREO income recorded in the current period due to the sale of our sole OREO asset in January 2024.
Previous wording
Non-Interest Expense. Total non-interest expense decreased $1.3 million to $29.1 million for the quarter ended March 31, 2024, compared to $30.4 million for the quarter ended March 31, 2023.
Current wording
Non-Interest Expense. Total non-interest expense remained flat at $29.8 million for the quarter ending September 30, 2024 compared to the quarter ended September 30, 2023.
Previous wording
Salaries and employee benefits decreased $1.1 million to $16.9 million for quarter ended March 31, 2024. This decrease was primarily driven by a non-recurring decrease in stock-based compensation and lower incentive compensation.
Current wording
Salaries and employee benefits decreased $263,000 to $17.5 million for quarter ended September 30, 2024. This decrease was primarily driven by a non-recurring decrease in stock-based compensation and lower incentive compensation, partially offset by annual merit increases and higher payroll taxes.
Previous wording
Equipment and systems expense increased $286,000 to $3.8 million for the quarter ended March 31, 2024, driven by increases in technology expense associated with the Company's ongoing digital banking initiatives.
Current wording
Equipment and systems expense increased $59,000 to $3.9 million for the quarter ended September 30, 2024, largely driven by increases in technology expense associated with the Company’s ongoing digital banking initiatives.
Previous wording
Other non-interest expense decreased $128,000 to $3.3 million for the quarter ended March 31, 2024. This decrease was primarily attributable to a $257,000 decrease in OREO expenses due to the January 2024 sale of a our sole OREO asset.
Current wording
Other non-interest expense increased $55,000 to $3.4 million for the quarter ended September 30, 2024. This increase reflected an increase in the provision for credit losses on off balance sheet commitments, offset by a decrease in OREO expenses following the sale of a our sole OREO asset in January 2024.
Previous wording
Provision for Income Taxes. Provision for income taxes decreased $1.2 million to $1.7 million for the quarter ended March 31, 2024 from $2.9 million for the quarter ended March 31, 2023.
Current wording
Provision for Income Taxes. Provision for income taxes decreased $2.2 million to $1.1 million for the quarter ended September 30, 2024 from $3.3 million for the quarter ended September 30, 2023.
Previous wording
Effective tax rates for the quarter ended March 31, 2024 and 2023 were 18.8% and 22.0%, respectively. The decrease in the effective tax rate was primarily due to lower full year projected taxable income and the impact of a nontaxable payout on one life insurance policy in the current year period.
Current wording
Effective tax rates for the quarter ended September 30, 2024 and 2023 were 15.1% and 25.2%, respectively. The decrease in the effective tax rate was primarily due to lower full year projected taxable income and an increase in non-taxable BOLI income compared to the prior year period.
Previous wording
At March 31, 2024, liquidity included $71.0 million of short-term cash and equivalents and $1.10 billion of investment securities available for sale. As of March 31, 2024, we had the capacity to borrow additional funds totaling $1.07 billion and $403.4 million from the FHLBNY and the Federal Reserve discount window, respectively, without pledging additional collateral. We had the ability to pledge additional securities to borrow an additional $336.7 million at March 31, 2024. As of that same date, we also had access to unsecured overnight borrowings with other financial institutions totaling $950.0 million of which none was outstanding.
Current wording
At September 30, 2024, liquidity included $155.6 million of short-term cash and cash equivalents and $1.07 billion of investment securities available for sale. As of September 30, 2024, we had the capacity to borrow additional cash funds totaling $2.06 billion and $663.9 million from the FHLBNY and the Federal Reserve discount window, respectively, without pledging additional collateral. We had the ability to pledge additional securities to borrow an additional $62.8 million at September 30, 2024. As of that same date, we also had access to unsecured overnight borrowings with other financial institutions totaling $920.0 million of which $270.0 million was outstanding.
Previous wording
At March 31, 2024, we had outstanding commitments to originate and purchase loans totaling $20.4 million while such commitments totaled $23.3 million at June 30, 2023. As of those same dates, our pipeline of loans held for sale included $13.4 million and $11.7 million, respectively, of loans in process whose terms included interest rate locks to borrowers that were paired with a best-efforts commitment to sell the loan to a buyer at a fixed price and within a predetermined timeframe after the sale commitment is established.
Current wording
At September 30, 2024, we had outstanding commitments to originate and purchase loans totaling $52.2 million while such commitments totaled $47.9 million at June 30, 2024. As of those same dates, our pipeline of loans held for sale included $17.8 million and $16.0 million, respectively, of loans in process whose terms included interest rate locks to borrowers that were paired with a best-efforts commitment to sell the loan to a buyer at a fixed price and within a predetermined timeframe after the sale commitment is established.
Previous wording
Construction loans in process and unused lines of credit were $63.3 million and $166.0 million, respectively, at March 31, 2024 compared to $58.5 million and $169.5 million, respectively, at June 30, 2023. We are also subject to the contingent liabilities resulting from letters of credit whose outstanding balances totaled $115,000 at March 31, 2024 and June 30, 2023, respectively.
Current wording
Construction loans in process and unused lines of credit were $117.4 million and $154.1 million, respectively, at September 30, 2024 compared to $75.7 million and $157.3 million, respectively, at June 30, 2024. We are also subject to the contingent liabilities resulting from letters of credit whose outstanding balances totaled $160,000 at September 30, 2024 and June 30, 2024, respectively.
Rearranged previous paragraphs (13)
Previous report — wording carried elsewhere
Comparison of Operating Results for the Nine Months Ended March 31, 2024 and March 31, 2023
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Net Interest Income. Net interest income decreased by $26.4 million to $109.3 million for the nine months ended March 31, 2024 compared to $135.7 million for the nine months ended March 31, 2023. The decrease between the comparative periods resulted from an increase of $58.2 million in interest expense, partially offset by an increase of $31.8 million in interest income. Included in net interest income for the nine months ended March 31, 2024 and 2023, respectively, was purchase accounting accretion of $2.0 million and $4.4 million, and loan prepayment penalty income of $513,000 and $710,000.
Previous report — wording carried elsewhere
Details surrounding the composition of, and changes to, net interest income are presented in the table below which reflects the components of the average balance sheet and of net interest income for the periods indicated. We derived the average yields and costs by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented with daily balances used to derive average balances. No tax equivalent adjustments have been made to yield or costs. Non-accrual loans were included in the calculation of average balances, however interest receivable on these loans has been fully reserved for and therefore not included in interest income. The yields and costs set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.
Previous report — wording carried elsewhere
(1)Loans held-for-sale and non-accruing loans have been included in loans receivable and the effect of such inclusion was not material. Allowance for credit losses has been included in non-interest-earning assets.
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(2)Fair value adjustments have been excluded in the balances of interest-earning assets.
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(3)Includes interest-bearing deposits at other banks and FHLB of New York capital stock.
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(4)Includes average balances of non-interest-bearing deposits of $597.2 million and $656.4 million for the nine months ended March 31, 2024 and 2023, respectively.
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(5)Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
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(6)Net interest margin represents net interest income as a percentage of average interest-earning assets.
Previous report — wording carried elsewhere
Additional information regarding the ACL and the associated provisions recognized during the nine months ended March 31, 2024 and 2023 is presented in Note 6 to the unaudited consolidated financial statements as well as the Comparison of Financial Condition at March 31, 2024 and June 30, 2023.
Previous report — wording carried elsewhere
The remaining changes in the other components of non-interest income between comparative periods generally reflected normal operating fluctuations within those line items.
Previous report — wording carried elsewhere
The remaining changes in the other components of non-interest expense between comparative periods generally reflected normal operating fluctuations within those line items.
Previous report — wording carried elsewhere
The decrease in income tax expense reflected a lower level of pre-tax income as compared to the prior period, partially offset by $5.7 million of discrete tax cost associated with the BOLI restructure.